NOTE: Stipulations of Fact and Consent to Penalty (SFC); Offers of Settlement (OS); and Letters of Acceptance Waiver, and Consent (AWC) are entered into by Respondents without admitting or denying the allegations, but consent is given to the described sanctions & to the entry of findings. Additionally, for AWCs, if FINRA has reason to believe a violation has occurred and the member or associated person does not dispute the violation, FINRA may prepare and request that the member or associated person execute a letter accepting a finding of violation, consenting to the imposition of sanctions, and agreeing to waive such member's or associated person's right to a hearing before a hearing panel, and any right of appeal to the National Adjudicatory Council, the SEC, and the courts, or to otherwise challenge the validity of the letter, if the letter is accepted. The letter shall describe the act or practice engaged in or omitted, the rule, regulation, or statutory provision violated, and the sanction or sanctions to be imposed.

December 2011

Alan David Goddard Jr.AWC/2009016157802/December 2011

Goddard actively engaged in a member firmís investment banking and
securities business
as a principal without proper registration.

Goddard signed selling
agreements and consulting agreements with issuers on the firmís
behalf as an officer of
the firm and worked closely with the firmís outside counsel to
establish the terms of selling
agreements and private placement offerings that the firm
conducted. Unbeknownst to
Goddard, the firmís CCO amended the firmís Application for
Broker-Dealer Registration
(Form BD) to list Goddard as the firmís CEO.

During
Goddardís entire association with the firm, he was only registered
as a general securities
representative; Goddard took the Series 24 examination but failed.
Goddard erroneously
believed that he could function in the capacities set forth above
without a principalís
license.

Gallagher acted as a principal of his member firm without being registered as such and the firm allowed Gallagher to act in an unregistered capacity.

Gallagher failed to adhere to the heightened supervisory requirements FINRA imposed and the agreements he entered into with three states; because of his controlling role at the firm and the transitory nature of supervision at the firm, he was able to sidestep the heightened supervision requirements. The firm failed to ensure that Gallagherís heightened supervisory requirements from the states and FINRA were being followed, and failed to have a system to adequately monitor Gallagherís compliance.

Gallagher was responsible for the firm adhering to the requirements to establish, maintain and enforce written supervisory control policies and ensuring the completion of an annual certification certifying that the firm had in place processes to establish, maintain, review, test and modify written compliance policies and WSPs to comply with applicable securities rules and regulations. The firm failed to conduct the analysis required to determine whether, as a producing manager, Gallagher should have been subjected to the heightened supervision requirements.

The firm failed to establish, maintain and enforce written supervisory control policies and procedures and failed to identify at least one principal who would establish, maintain and enforce written supervisory control policies and procedures. In addition, through Gallagher, the firm, failed to ensure that an annual certification was complete, certifying it had in place processes to establish, maintain, review, test and modify written compliance policies and WSPs to comply with applicable securities rules and regulations.

Moreover, FINRA found that the firm failed to report customer complaints against Gallagher and one customer-initiated lawsuit in which he was listed as a defendant.

Furthermore, the firm failed to make the necessary and required updates to Forms U4 and U5 for representatives to reflect customer complaints, arbitrations and lawsuits within the required 30 days.

Thefirm failed to conduct and evidence an independent test of its AML program, and failed to conduct and evidence an annual training program of its CE program for its covered registered persons.

While testifying at a FINRA on-the-record interview, Gallagher failed to respond to questions.

Gallagher willfully failed to timely amend his Form U4 with material facts. Gallagher appealed the decision to the NAC and the sanction is not in effect pending the appeal.

Gallagher willfully failed to timely amend his Form U4 with material facts. Gallagher appealed the decision to the NAC and the sanction is not in effect pending the appeal.

June 2011

Brean Murray Carret & Co., LLC AWC/2009016262303/June 2011

The Firm permitted individuals who were registered as general securities representatives (GSRs), and another individual who was registered as a GSR and a research analyst, to function as principals without being registered as general securities principals (GSPs). Each of the individuals was actively engaged in the management of the firmís investment banking and/or securities business by, among other things, supervising persons associated with the firm. The firm did not establish and maintain a supervisory system reasonably designed to achieve compliance with the rules and regulations applicable to the registration of principals. The firm failed to adequately ensure that individuals had the requisite registrations to supervise employees and business areas to which they were assigned. Specifically, the firm failed to promptly identify all persons who needed principal registrations, and after identifying individuals who should become registered as principals, the firm permitted them to delay taking the required examinations, which, in turn, contributed to the registration violations.

Brean Murray Carret & Co., LLC : Censured; Fined $40,000; Required to review its supervisory system and procedures concerning compliance with applicable laws, regulations and rules regarding principal registration, and to determine whether individuals previously identified as requiring principal registration have become so registered. No later than 60 days after issuance of the AWC, the firm shall prepare a writtenreport detailing its review, findings and recommendations, and submit a copy of that report to FINRA. A firm officer must certify to FINRA in writing that it has completed its review and has established systems and procedures regarding principal registration.

sold the private placement offerings of a company formed exclusively to acquire and provide growth to its parent company and a limited liability company for which Brewer was a director, without disclosing to the investors material facts that:

the parent company had defaulted on a $2.5 million loan,

had reported an operating loss of $1,622,912 for one calendar year and an approximate operating loss of $4.5 million for another calendar year, and

had defaulted on interest payments to note-holders.

continued to sell the limited liability companyís private placement offering to new investors, knowing that it had defaulted on its interest payments to existing investors and without disclosing that material fact to new investors.

The firm sold the private placement offerings to non-accredited investors without providing them with the financial statements required under Securities and Exchange Commission (SEC) Rule 506, resulting in the loss of exemption from the registration requirements of Section 5 of the Securities Act of 1933. Because no registration statement was in effect for the offerings and the registration exemption was ineffective, the firm sold these securities in contravention of Section 5 of the Securities Act of 1933.

Acting through Erickson, the Firm conducted inadequate due diligence related to its sale of the offerings in that it failed to ensure the issuers had retained a custodian to handle certain investorsí qualified funds prior to accepting investment of Individual Retirement Account (IRA) funds into the offerings.

Ating through Erickson and Brewer, the Firm offered to sell and sold the companyís private placement offering by distributing to the public a private placement memorandum (PPM) containing unbalanced, unjustified, unwarranted or otherwise misleading statements; among other things, the PPM implied that the parent company was not experiencing financial difficulty and failed to disclose that it reported a significant loss one year. In addition, the investors in the companyís notes were not provided with financial statements for either the company or the parent company. Moreover, the PPM was misleading in that it failed to state clearly how offering proceeds would be used, lacked clarity regarding the relationship between the issuer and its affiliates, and failed to provide the basis for claims made regarding the performance expectations of the issuer or its affiliates.

Furthermore, the firm failed to establish adequate written supervisory procedures related to its sales of private placement offerings, in that the firmís procedures failed to require that financial statements be provided to investors when private placement offerings are sold to non-accredited investors, pursuant to SEC Rule 506.

The Firm allowed Brewer to be actively engaged in managing the firmís securities business without being registered as a principal and a representative although Brewer signed and submitted an attestation to FINRA stating he would not be actively engaged in the management of the firmís securities business until he completed registration as a representative and principal. Among other things, Brewer reviewed and revised the firmís recruitment brochure, approved offer letters to prospective firm registered representatives, dictated the structure of new representativesí compensation, including the level of commissions and loan repayment terms, and instructed firm personnel to send private placement offering documents to prospective investors.

The firm maintained the registrations for individuals who were not active in the firmís investment banking or securities business or were no longer functioning as registered representatives.

The Firm conducted a securities business on a number of days even though it had negative net capital on each of those dates. The firmís net capital deficiencies were caused by its failure to classify contributions from the parent company as liabilities after the firm returned the contributions to the parent company within a one-year period of having received them, and improperly treating its assets as allowable even though all of its assets had been encumbered as security for a loan agreement the parent company executed. Moreover, the Firm had inaccurate general ledgers, trial balances and net capital computations, and filed inaccurate Financial and Operational Uniform Single

The Firm permitted a person registered solely as a general securities principal who had not passed the necessary qualification examination to approve research reports a firm research analyst prepared, which the firm issued. The firm published a research report regarding a company, which did not disclose that the firm had co-managed an initial public offering of securities for the company during the past 12 months. The firm began making a market in a companyís securities, and on the same day the firm published a research report concerning the same company that did not disclose that it was making a market in the companyís securities. The firm published research reports containing disclosures NASD Rule 2711(h) required that were not presented on or referred to on the front page of such reports.

Two of the more fundamental items on the "research" checklist for compliance departments. One, reports must disclose recent co-managed/managed IPOs. Two, among the most basic of conflicts is issuing research on a company that your firm makes a market in. Oops.

January 2011

William James McCluskey (Principal)AWC/2009016262301/January 2011

McCluskey acted in a principal capacity at his member firm without being properly registered as a principal. Although a large percentage of McCluskeyís time was devoted to business development, he was actively engaged in the management of his firmís investment banking and securities business. Duirng that time period, McCluskey was the firmís President and Chief Executive Officer, was responsible for all of the firmís securities and investment banking operations, supervised various registered persons, including the firmís Chief Financial Officer, a branch manager and managing directors, and was involved in the daily supervision of the firmís investment banking business.

William James McCluskey (Principal): Fined $15,000; Suspended 10 business days

Stockbroker Expungement Grapples With Death and Taxes in Time of Plague (BrokeAndBroker.com Blog)http://www.brokeandbroker.com/5257/FINRA-Expungement-Taxes/It is said that the only certainties in life are death and taxes. In today's featured FINRA expungement arbitration, we get to deal with both of life's certainties. We have a deceased customer. We ha... Read On